VANCOUVER, Sept. 15, 2017 /CNW/ – Hemisphere Energy Corporation (TSX-V: HME) (“Hemisphere” or the “Company”) is pleased to announce that it has entered into a new and significantly increased credit facility (the “New Credit Facility”) with Cibolo Energy Partners, LP and certain of its affiliates (collectively, “Cibolo”), a Houston-based firm focused on energy investment opportunities. The New Credit Facility is a strategic and transformational transaction for Hemisphere that will allow the Company to accelerate the development of its southern Alberta Atlee Buffalo waterflood oil assets. Consequently, the Company has repaid and terminated its existing credit facility with its Canadian bank (the “Former Credit Facility”).

All amounts are expressed in Canadian dollars, unless otherwise stated.

New Credit Facility

Hemisphere has entered into a first lien senior secured credit agreement with Cibolo providing for a multi-draw, non-revolving term loan facility of a maximum aggregate principal amount of up to US$35.0 million, with an initial commitment amount of US$15.0 million. This represents an approximate 50% increase in currently available credit to Hemisphere as compared to its Former Credit Facility. Hemisphere has made an initial draw of US$10.0 million of the initial US$15.0 million commitment under the New Credit Facility. Additional commitments are subject to further approval by Cibolo. The interest rate for the New Credit Facility is the three-month United States dollar London Interbank Offered Rate (“LIBOR”) with a LIBOR floor of 1%, plus 7.50% payable quarterly, for a five-year term with a maturity date of September 15, 2022.

Use of Proceeds and Development Plan

The New Credit Facility has been used to fully repay the outstanding indebtedness under the Former Credit Facility and will also be used to greatly expand the Company’s development in the Atlee Buffalo area. Hemisphere’s Board of Directors and Cibolo have approved a development plan under which Hemisphere intends to make capital expenditures of up to $7.6 million in the remainder of 2017. These expenditures include plans to drill seven additional wells in Atlee Buffalo, expand its F pool facility, and construct a new water separation and re-injection facility in the G pool. This will allow the Company to drill in an area of unattributed reserves in the F pool, optimize and increase production capability in the G pool, expand its field-wide reservoir simulation, and set up for an aggressive 2018 drilling program.

Warrants

In conjunction with the New Credit Facility, the Company has issued 13,750,000 warrants (the “Warrants”) to Cibolo. Each Warrant entitles Cibolo to purchase one common share of Hemisphere at an exercise price of $0.28 prior to September 15, 2022. The exercise price of the Warrants represents a 40% premium to the 30-day volume weighted average price (“VWAP”) of Hemisphere’s common shares at market close on September 14, 2017. The Warrants are subject to a forced exercise clause which applies upon a 30-day VWAP equaling or exceeding $1.40 per share. The Warrants are non-transferable and are subject to a four-month hold period from the date of issuance.

Prior to the provision of the New Credit Facility, Cibolo did not own any securities of the Company. Assuming the exercise of all of the Warrants issued in conjunction with the New Credit Facility, Cibolo would own approximately 15% of the outstanding common shares of the Company. Except for the potential exercise of the Warrants and the related acquisition of common shares of the Company, Cibolo does not presently have any future intention to acquire ownership of, or control over, additional securities of the Company. Cibolo will file an early warning report, pursuant to National Instrument 62-103, in respect of its acquisition of the Warrants, which report will be available on the Company’s SEDAR profile at www.sedar.com or by contacting Dorlyn Evancic, Hemisphere’s Chief Financial Officer, at (604) 685-9255.

The Company will pay a cash finder’s fee to Integral Wealth Securities Limited of up to 2% on drawn funds under the initially committed US$15.0 million.

A copy of the credit agreement for the New Credit Facility will be filed on the Company’s SEDAR profile at www.sedar.com in due course.